Land of the sinking sun

Everybody knows : In the long run, stocks always go up. If you screw up a short term gamble, like buying some troubled financials, reposition your investments as a long term investment. You can afford to ignore further losses, as in the long run it will rebound. Maybe not this year, maybe not even next year but definitely someday your shares will make the u-turn towards green territory.

The positive assumption is especially interesting in Japan. The land of the rising sun is since two decades also known as the land of the sinking stocks and low interest rates. With all the current rate cuts both US and Europe are catching up with them by the way. After a peak in 1989 the Nikkei index has been dropping steadily with a few fake rebounds, spurring optimistic experts to overweight Japan (“this time is different, Japan’s new dawn“).

The year 1989 ended at record of 38915 points, a low in October 2008 traded around 7600 points corresponding with the level of 1982. Nice statistics, interesting numbers and nothing new here, but what does it mean? It means that a retiring Japanse derivative trader at the age of 34 could have invested his savings in the stock market back in 1982. In 2009 he is still waiting for his profits to arrive. He is 61 years old. Maybe the Nikkei will go up in the next years, and his stubborn optimistic investing style will be rewarded with profits after all. That could be the reason the life expectancy in Japan is among the highest in the world (over 81 years) – the whole nation is waiting for the stock market gains.

This proves the famous Keynes quote “In the long run, we’re all dead“. Seriously, I wouldn’t want to be the Japanse trader waiting for 26 years for profits. Scary.